Safeco and Subs Affirmed

S&P affirmed its “BBB+” counterparty credit rating on Safeco Corp. and its “A+” counterparty credit and financial strength ratings on the members of the Safeco Insurance Co. Intercompany Pool, which are Safeco Corp.’s property/casualty companies. The outlook on these companies is stable.

At the same time, S&P lowered its counterparty credit and financial strength ratings on Safeco Life Insurance Co. and its wholly-owned subsidiaries—Safeco National Life Insurance Co. and First Safeco National Life Insurance Co. NY—(collectively referred to as Safeco Life) to “A-” from “A” and placed the ratings on CreditWatch with developing implications.

S&P took these rating actions after Safeco Corp. announced Sept. 29, 2003, that it intends to sell its life companies. Safeco Life had historically maintained good capitalization, but in 2002 through the second quarter of 2003, capitalization dropped to the low “BBB” range of S&P capital adequacy model. Although S&P believes corrective actions will enable Safeco’s operating results to continue improving, the group faces moderate execution risk to produce sustainable earnings, especially in light of disposition of its non-core lines of business, which historically were reliable sources of income for the group. Safeco’s operating performance is expected to show continued improvement over the next two years, with a combined ratio of 100 to 102 percent in 2003.